You're building a car that seats four, gets 20mpg, goes 70mph and sells for $20,000. You make about $600 profit on it, 3% margin, and you sell 50 of them per year, so you are making a $30,000/yr and feeding your family.
Now the government mandates that it seats six, gets 30mpg, goes 100mph and says that you must sell it for $18,000. The upside of that is it will bring you more business so that now you can sell 80 of them per year. Instead of a $600 profit on each one, though, due to government mandated features and pricing, you are going to take a $1000 loss per unit.
That's okay (insurance companies), you can make it up on volume.